Nike filed a lawsuit in New York against the shopping platform StockX for creating and marketing digital property certificates (NFTs) based on the brand’s products.
StockX, which buys and resells clothing and tech products, specializes primarily in athletic shoe auctions, which can fetch hundreds of thousands of dollars.
Nike’s lawyers accused US-based StockX of “minting” NFTs using its trademarks.
StockX is “selling those NFTs at highly inflated prices to unsuspecting consumers who believe or are likely to believe that these ‘investable digital assets’ (as StockX calls them) are, in fact, licensed by Nike, when they are not,” says the lawsuit, filed Thursday.
Nike is seeking damages and an injunction to force StockX to stop sales.
The NFT market
Created just a year ago, NFTs (non-fungible tokens) have increasingly become a mainstay of auction houses and the art market, where virtual works have fetched multi-million dollar prices.
StockX offers NFTs with digital versions of objects whose ownership is traceable. For example, an image of the “KAWS Sacai Nike Blazer Low Blue (Vault NFT)” shoe is available on StockX for $549.
“Each Vault NFT is backed by a physical item in the custody of StockX,” the website states.
“This means that if you buy a Vault NFT edition, you are the owner of the corresponding physical good that is protected and stored in the StockX vault“.
In its lawsuit, Nike describes NFTs as an “exciting way for brands to engage with their consumers inside and outside the Metaverse.”
But nevertheless, “this new frontier has quickly become a virtual playing field for infringers to step over some of the trademarks most famous in the world and use them without authorization to market their virtual products and generate ill-gotten gains, “added Nike.
According to the group, StockX has already sold more than 550 Nike-branded NFTs.
In April, StockX was valued at $3.8 billion after raising $255 million in funding. The platform reported revenue of $400 million in 2020.
the coming battle
Last month it was the luxury brand Hermès that filed a lawsuit in New York against the artist Mason Rothschild, who sold at auction 100 “MetaBirkins“, that is, digital reproductions of a brand bag, registered with NFT.
The Hermès case is complex, since it occurs in the United States, where artistic creation is protected by the first amendment to the Constitution, which stipulates freedom of expression, explains lawyer Annabelle Gauberti, from the Crefovi cabinet in Paris.
Gauberti recalls a case that happened a decade ago, when the Louis Vuitton brand lost a lawsuit against a Dutch artist who included one of his bags in a photo with a refugee from Darfur.
In US and UK courts “the artistic use (of a trademark) argument usually works well,” adds Gauberti.
But in the case of artist Mason Rothschild, that defense could be seriously undermined by the fact that the artist made tens of thousands of dollars from those bags destined for the metaverse. “His legal team will have to work hard,” warned this lawyer.
In Nike’s case, it’s a straight business thing, as StockX never intended its NFTs to be works of art.
“It remains to be seen how far Intellectual right protection in the digital worldas well as the solutions that can be found”, explained the lawyer Danielle Garno in a note for the Lexology blog.
https://www.youtube.com/watch?v=6ANiXCX_7OY
Are NFTs works of art?
In a response to Hermès that he posted on Twitter, Rothschild compares his “MetaBirkins” to Andy Warhol’s famous painting of Campbell’s soup cans (1962).
“The fact that I sell art through NFT doesn’t change the fact that it’s art,” he says.
Edward Lee, who directs a program on intellectual property at Chicago-Kent Law School, disagrees with this comparison.
In an article published in Bloomberg Law, this specialist warns that the Campbell brand did not plan to enter the art world. While Hermès could be interested in selling digital items, through its own NFTs.
An NFT is not something tangible, but a computer file, a proof of authenticity that its defenders claim is indestructible, since they are strings of numbers and letters that are registered on computer servers.
“Many people believe that when talking about NFT the content is inside the token, but that is not the case,” recalls Primavera De Filippi, co-author of the book “Blockchain and the Law”, in Business of Fashion magazine.
Can trademarks protect their creations?
Hermès is demanding artist Mason Rothschild destroy his “MetaBirkins”, which the crypto-art platform OpenSea has agreed to withdraw from sale.
It’s a no from Hermès when it comes to the Metabirkin NFTs. https://t.co/ZVnyKfexMA
— highsnobiety (@highsnobiety) February 10, 2022
But the legal problems do not end there, since people who have already paid thousands of dollars for one of these digital bags, will they be able to sell them later?
“In terms of law, it’s the wild west“, resume Gauberti.
The only solution is for brands to create their own NFTs. That’s what Nike did when it bought the company RTFKT, which specializes in the design of virtual sneakers, last December.
“The attack is the best defense,” advises Gauberti. “But at the moment these brands are still hesitating, because the essence of their activity is still material products, and they are waiting to see if the metaverse will take off,” he says. (AFP)
